A group of property owners who paid impact fees (“water availability charge”) recently sought to challenge a district court’s decision granting partial summary judgment in favor of the Washington County Water Conservancy District, which found that the level of service standard that allowed the impact fees to be assessed was legal and reasonable as a matter of law. However, the Utah Supreme Court declined to grant interlocutory review to the class of property owners, holding that the case was not properly certified under Utah Rule of Civil Procedure 54(b), and declining to exercise its discretion to grant interlocutory review under Utah Rule of Appellate Procedure 5(a).

Property Owners Sue Over “Water Availability Charge”

In, Washington Townhomes v. Washington County, a group of property owners who were required to pay a “water availability charge” filed suit against the Washington County Water Conservancy District alleging that the impact fees were in contravention of the Utah Impact Fees Act, U.C.A. §§ 11-36a-201 to -205, and that those impact fees amount to a taking under both the U.S. Constitution and the Utah Constitution.

Water Conservancy District Defends Its Impact Fees

The Washington County Water Conservancy District responded to the property owners’ allegations by claiming that the impact fees “were based on a ‘level of service’ standard imposed on the water conservancy district by the Utah Division of Drinking Water.” According to the Washington County Water Conservancy District, the level of service standard is mandatory, and that the water conservancy district is “required to follow the [Utah Division of Drinking Water] standard in planning and building its infrastructure.” Additionally, the Washington County Water Conservancy District has set forth that the “level of service standard is a ‘legislative’ judgment that survives scrutiny under the Impact Fees Act and constitutional takings provisions.”

Water Conservancy District Granted Partial Summary Judgment

In the lower court, the Washington County Water Conservancy District sought and obtained partial summary judgment on the property owners’ claims. There, the trial court held “that the Level of Service adopted by and for the purposes of the District‘s 2006 Capital Facilities Plan and Impact Fee Analysis based upon a standard established by the [Utah Division of Drinking Water] was legal and reasonable as a matter of law.” Upon a stipulation of the parties, the trial court certified the matter for an immediate appeal under Rule 54(b), concluding that “a determination of this critical threshold issue at the appellate level would be the most efficient use of judicial resources,” and that the trial court could see “no just reason for delay.” The class of property owners thereafter appealed.

Utah Supreme Court Declines to Hear Appeal

On appeal, the Utah Supreme Court declined to hear the property owners’ appeal, citing two grounds for its decision. First, the supreme court held that the case had not been properly certified under Rule 54(b) “because there was no ‘judgment as to one or more but fewer than all of the claims or parties’ at issue,” as required by the rule. Second, the supreme court held that, even though it could exercise its discretion to grant interlocutory review under U.R.A.P. 5(a), it declined to do so in this case.

District Court’s Rule 54(b) Certification Improper

In discussing the Rule 54(b) issue, the supreme court noted that “the district court certified its decision granting the District‘s motion for partial summary judgment as a matter meriting an immediate appeal,” and that the district court had “purportedly cued the case up for ‘a determination of [a] critical threshold issue at the appellate level’ by finding that there was ‘no just reason for delay.’” The supreme court said that while it appreciated the district court’s and parties’ “interest in appellate guidance … [t]he statutory and constitutional standards of relevance to this dispute are less than a model of clarity,” and that even though “appellate clarification of the operative legal standards could conceivably advance the ultimate disposition of this case,” that was “not the only question under rule 54(b).”

Generally, a party may not appeal anything but a final judgment; however, there are exceptions to that general rule. Among those exceptions is a certification under Rule 54(b). Under Rule 54(b), in order “[t]o qualify for certification … a district court decision must constitute a ‘judgment as to one or more but fewer than all of the claims or parties’ at issue in the case.” In cases where a partial judgment is entered, a district court “may certify the case for an immediate appeal if it decides that ‘there is no just reason for delay.’” Absent such a certification under Rule 54(b), an appellate court lacks jurisdiction to hear any appeal.

District Court’s Decision Did Not Constitute a Judgment

In the present case, the Utah Supreme Court determined that “[t]he district court‘s decision did not finally dispose of any claim and did not finally adjudicate the interests of a party.” Rather, the supreme court said the district court’s decision only “decided a threshold issue of possible relevance to the ultimate disposition of the plaintiffs’ claims. And that is insufficient under rule 54(b).”

The supreme court explained that, in order “[t]o dispose of the plaintiffs‘ statutory or constitutional challenges at issue, the district court would have had to enter judgment awarding (or declining to award) one of the remedies they sought—a declaration that the impact fees imposed by the District are ‘null and void and of no effect,’‖ or a ‘damage award … for all damages suffered as a result of the imposition and collection of illegal Impact Fees and exactions.’” However, no such judgment was entered in this case, as the supreme court pointed out:

The district court did not reach the question whether the impact fees imposed by the District were “null and void and of no effect,” or whether plaintiffs were entitled to damages for the imposition of improper impact fees. It considered only the legality and reasonableness of the level of service standard “adopted by and for the purposes of the District‘s 2006 Capital Facilities Plan and Impact Fee Analysis based upon a standard established by the [Utah Division of Drinking Water].”

The legality and reasonableness of the District’s level of service standard may (or may not) be relevant to the ultimate disposition of the plaintiffs‘ statutory and constitutional claims. But there is no question that the district court’s decision did not render a “judgment as to one or more but fewer than all of the claims or parties” at issue in the case. And we find a lack of jurisdiction under rule 54(b) on that basis.

Supreme Court Declines to Allow Immediate Appellate Review

Having determined that the matter had not been properly certified for immediate appellate review under Rule 54(b), the Utah Supreme Court turned to its “appellate discretion to treat a ‘timely appeal from an order certified under Rule 54(b)’ as a ‘petition for permission to appeal an interlocutory order” under U.R.A.P. 5(a). The supreme court explained that U.R.AP. 5(a):

[G]ives us discretion to consider the briefs filed on appeal as a petition for permission to pursue an interlocutory appeal. But it does not require that we reach the merits of the interlocutory appeal. We retain the discretion to deny a petition under appellate rule 5(a)—to treat the improperly certified appeal as a petition for interlocutory review, but to decline to grant the interlocutory appeal. And we take that route here.

An interlocutory appeal is appropriate where appellate intervention is necessary “to adjudicate principles of law or procedure in advance as a necessary foundation upon which the trial may proceed.” Where that is so, an appellate decision may promote “the desired objective of efficiency in procedure” despite the fact that it is interposed before a final judgment.

Supreme Court Rejects Arguments Over Immediate Appealability

Both the class of property owners and the Washington County Water Conservancy District argued to the supreme court that the aforementioned standard had been met in this case. The parties claimed that the supreme court’s “input on the reasonableness or legality of the District‘s ‘level of service’ standard will advance the timely disposition of this case.” Additionally, the parties “insist[ed] … that the district court’s decision implicates threshold ‘principles of law’ that will serve as a ‘necessary foundation’ on which further proceedings will be based.

In response, the Utah Supreme Court “concede[d] that there are important issues highlighted by the parties that will affect further proceedings in the district court.” Even still, the supreme court “decline[d] to resolve them because we find an inadequate basis for doing so on the record before us on this appeal.”

Parties Contest Level of Service Standard

A primary disagreement highlighted by the parties’ briefing involved “the legal and practical effect of the level of service standard adopted by the [Utah Division of Drinking Water],” which the Washington County Water Conservancy District suggests is rendered “reasonable as a matter of law under the Impact Fees Act and under the takings provisions of the Utah and U.S. Constitutions,” on account of the fact that the “standard was adopted legislatively either by the District or the by the [Utah Division of Drinking Water].”

The Utah Supreme Court said the conservancy district’s “legislative” argument raised a threshold issue under the holding in Dolan v. Tigard. In Dolan, the U.S. Supreme Court established a takings standard as it related only to impact fees that are imposed on an “adjudicative” basis, but said nothing about impact fees imposed on a “legislative” basis. Even still, the supreme court recognized that the water conservancy district may be arguing that legislative adoption in the present case is akin to the adjudicative imposition in Dolan: “Because the impact fee regime at issue here—including the level of service standard that underlies it—was purportedly adopted legislatively, the District may be asserting that its approach should survive scrutiny on that basis,” the Utah Supreme Court said. The court said that the property owners understood the water conservancy district’s arguments the same way.

The “Kings’ X” Theory

The property owners claimed that the water conservancy district’s “legislative” argument was effectively one that would “immunize” the level of service standard from review under a “King’s X” sort of theory. “This approach suggests that the Dolan standard does not control here—that plaintiffs’ real beef is with the legislatively adopted [Utah Division of Drinking Water] standard, and that such a challenge may be subject only to rational basis or reasonableness review.” However, the supreme court said “it [was] unclear whether this is the District‘s position. At oral argument the District seemed to disavow the ‘King’s X’ position.”

Water Conservancy District Argues Level of Service Standard Survives Under Dolan

The supreme court then explained that the Washington County Water Conservancy District had advanced an alternative argument as to why the Dolan standard should apply in its briefing. According to the court:

Because it views itself legally bound to build infrastructure and facilities as dictated by the [Utah Division of Drinking Water] level of service standard, the District insists that this standard is by definition a precise, accurate measure of the impact of new development on the District—and thus one that would survive under Dolan. Thus, the District rejects the plaintiffs‘ assertion that it is somehow bound to assess the level of impact of new development on the basis of actual water usage. It claims that such usage data is beside the point as a legal matter—that the District is bound to follow the [Utah Division of Drinking Water] standard, and thus that plaintiffs cannot establish that the governing “level of service can or should be limited to the ‘measure of demand that [a] new home will impose,‘ rather than take into account the systematic components required for a safe and reliable public water supply system and which are part of the ‘state standard of demand’” imposed by [the Utah Division of Drinking Water].

Property Owners Disagree That Level of Service Standard Survives Scrutiny

The supreme court said the property owners’ briefing disagreed with the above premise to some extent, including that “the [Utah Division of Drinking Water] ‘requirements were never intended to be used for calculating impact fees,’ and insisting that a reasonable level of service standard would be based on evidence of actual water usage rather than the [Utah Division of Drinking Water‘s] historical standard.” The property owners also challenged the theory that “a legislatively adopted impact fee would not be subject to heightened review under Dolan.” Alternatively, the property owners argue that “the District‘s decision should be considered adjudicative rather than legislative. And they accordingly insist that the Dolan standard applies, and that their case is a challenge to the District‘s impact fee analysis and not to the underlying [Utah Division of Drinking Water] level of service standard.”

Utah Supreme Court Ultimately Dismisses Appeal

The Utah Supreme Court responded to these arguments by saying that, while “[t]he briefing on these and other issues has highlighted ‘principles of law’ that may provide ‘a necessary foundation upon which the trial may proceed,’” it “could not render a conclusive judgment.” Accordingly, the court dismissed the matter on jurisdictional grounds; however, “recognizing that there are important threshold questions presented that may provide a ‘necessary foundation upon which the trial may proceed.’”